What is Financial System?
A financial system is a conglomerate of various markets, instruments, operators, and institutions that interact within an economy to provide financial services such as resource mobilization and allocation, financial inter-mediation and facilitation of foreign exchange transactions to exchange foreign trade. Financial system in a market economy is comprised of both of monetary and non-monetary claims (i.e., served debt and equity). Places, institutions or communication systems that provide a market where financial claims can be bought and sold. Specialists such as brokers and underwriters who aid in the direct transfer of funds from surplus to deficit units.
The Components of the Nigerian Financial System and its Operations
The Nigerian financial system comprises of the regulatory/supervisory authorities, banks and non-banking financial institutions. The regulatory bodies are the Central Bank of Nigeria (CBN) which is at the apex, the Nigerian Deposit Insurance Corporation (NDIC), Security and Exchange Commission (SEC), the Federal Ministry of Finance (FMF), the Nigerian Supervisory Board (NISB), and the Federal Mortgage Bank of Nigeria (FMBN).
The CBN is a major regulator and supervisor in the money market, with the NDIC playing a complementary role. The CBN exclusively regulates the activities of finance companies and promotes the establishment of development banks. The National Board for Community banks, while the final granting of licence is the CBN’s responsibility. The SEC is the Apex regulator/ supervisor in the capital market, with NSE as self-regulatory institution. The FMF and the CBN share control over Bureaux de change while the NISB is the regulatory authority in the insurance sector. The FMBN regulates mortgage financial business in Nigeria (CBN, 1990). Developmentally, the Nigeria financial system has witnessed a rapid growth in the last two decades. This could be seen from the widespread establishment of many financial institutions. The growth can be claimed to due to the oil boom and the awareness of the importance of money by Nigerians…
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